Enter to open, tab to navigate, enter to select
Pooling and Unitization (US)
Practical Law Glossary Item w-029-4992 (Approx. 3 pages)
Glossary
Pooling and Unitization (US)
Pooling is the process of combining small tracts of real property to meet regulation spacing requirements for drilling a single well. Unitization is the grouping of many individual tracts and drilling units for joint development and production of a common source, such as a reservoir or field, to optimize costs, improve efficiencies, and enhance resource extraction.
Pooling and unitization can be either:
- Voluntary when mineral estate owners agree to combine various tracts of land.
- Involuntary (forced or compulsory pooling) because of an order issued by the state administrative body that oversees oil & gas matters (in Texas, the Railroad Commission).
When tracts of land are pooled or unitized:
- Operations on any part of the pool or unit benefit all the leased tracts regardless of where they were conducted.
- Production and costs are allocated pro rata among the pooling participants. In the pooling context, the allocation generally is based on the proportion that the surface acreage bears to the whole pooled area. In the case of unitization, the allocation is more complex, usually involving additional factors, such as geological properties of the formation, estimates of hydrocarbons in place, and other engineering criteria.
- Royalties are paid to each lessor based on the production allocated to each leased tract out of the entire pooled or unitized area.